New mtg, old mtg, fha/conventional questions

[WhirledPeasPlease]

I'm less than 6 weeks from closing on new construction.  I had the mtg guy pull scores -- He pulled TU688/EQ693/EX670.  My scores when he originally pulled were TU641/EQ593/EX597 (Nov 28th, 2007).

My DTI was outta whack so I PIF on my car lease (14k), but this ate into my DP funds.

I'm keeping my current property as a rental with a current house payment of 695 (w/o T/I).  I can refi to get into a MUCH lower payment, but I'm not sure if it's worth it if I'm not going to keep the house as a rental for longer than a year.  (This is a guaranteed lease option I chose in order to remove the contingency in order to start construction.)  I'm guaranteed 550/mo in rental income.

The new payment w/ zero down (except for 3 percent DPA) will be around 1090 -- inclusive of TI, PMI, and association fees on an FHA loan.

I lose the 3 percent if I go Conventional, but I no longer have 20 percent to put down -- so I'm back to PMI again.

I was told I can get out of PMI on the FHA loan when I get to 78 percent LTV and at least 24 months have passed.  Is this true for conventional as well?

I have about 10 percent to put down on the house at this point.  Good idea?  Or should I just take the zero/3 percent option and let it ride?

Please feel free to ask for clarification or more info!

I'm looking at a rate around 6.5-6.875 w/o buying down points.

[ShanetheMortgageMan]

To get out of the monthly MI on FHA you need to be at 78% of the original value or purchase price (whichever was less) and need to pay the MI for 5 years (scheduled or actual), not 2 years.  It's typically 12-24 months for conventional though.

With a 680 score and 10% down, I'd closely compare your options for conventional & FHA... you'll see the interest rates are about the same, the monthly MI is higher for conventinal, but FHA has an upfront MIP fee whereas conventional does not.  Depending on your situation, how long you'd be in the home, do you plan on prepaying your mortgage, etc., will determine which is a better option for you.  With less than 10% down, FHA often works out to be the better option these days.

[WhirledPeasPlease]

I plan to stay in the house no more than 6 years.  I do not plan on pre-paying; however, I'm not opposed to a refi if a rate drop makes it worth it within that time frame.  I'm expecting a substantial score boost in Nov/Dec when some 90 day lates from 2001 drop off.

My mtg guy is keen on FHA, but my last two mtgs were conventional and I was kind of comfortable with those. 

Is there any real benefit to putting 10 percent down, other than reducing my monthly payment?  (This isn't much of an issue since I just got rid of a 456 dollar car payment.)

Thanks for the reply!

[ShanetheMortgageMan]

Being in the home for 6 years, with a 680+ score, 10% down, I'd opt for conventional.  You'll pay less in total mortgage insurance over that time period.  With conventional financing, mortgage insurance is more if you put less than 10% down than if you put 10% down... so that would be one reason you might want to stick with the 10% down payment.  Have your loan officer lay out both monthly payments for you, and tell you the difference in the MI factor so you can conclude which option you'd like to go with.

[WhirledPeasPlease]

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ShanetheMortgageMan wrote:

Being in the home for 6 years, with a 680+ score, 10% down, I'd opt for conventional.  You'll pay less in total mortgage insurance over that time period.  With conventional financing, mortgage insurance is more if you put less than 10% down than if you put 10% down... so that would be one reason you might want to stick with the 10% down payment.  Have your loan officer lay out both monthly payments for you, and tell you the difference in the MI factor so you can conclude which option you'd like to go with.

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Thanks Shane--

I'll call him back on Monday and check out the exact differences.  I was thinking the difference was about 20 bucks a month, but I'm not sure.